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KPN Is Running Short of Time
To Solve Its Financial Problems

Edited by Hugo Dixon

Updated Sept. 11, 2001 12:01 a.m. ET

The resignation of KPN's Chief Executive Paul Smits is just the start of the firm's long road to recovery. His successor Ad Scheepbouwer must solve an acute debt problem. The Dutch telecom's group's earnings before interest, taxes, depreciation and amortization, or Ebitda, is insufficient to cover both capital expenditure and interest payments on its 23 billion euro ($20.62 billion) mountain of debt. Without disposals or a balance-sheet restructuring, KPN might not turn cash flow positive until 2003. Indeed, it could face a one billion euro to two billion euro funding gap.